AfCFTA, Border Closure and Food Inflation
The AfCFTA (African Continental Free Trade Area) agreement aims to create a continental free trade area for goods and services in Africa. Durggh. It is expected to liberalise and facilitate the free movement of people, investments and businesses across the continent. This way, the rate of intra-African trade (currently at 16 to 17 percent) will increase to 52 per cent. The agreement was signed by some countries in Kigali, Rwanda, on 21st March 2018. Today, it is the largest trade agreement since the creation of the World Trade Organisation (WTO) in 1994. It will create a continental trade bloc of 1.3 billion people with a combined GDP of $3.4 trillion. It aims to attract $4 trillion in investments and consumer spending. It has the potential to lift 30 million people out of extreme poverty. How does it work? The agreement instructs state parties (countries that signed it) to treat products imported from other state parties the same way they would treat domestic products. Golden rule eh. State parties are expected to gradually eliminate import duties and charges. Concerning services, state parties are also to eliminate measures that restrict foreign (as in, African) service transactions, employment of Africans and participation of African businesses within their jurisdiction. Problem! Another problem! On paper, the AfCFTA has great prospects right? Well, it was all going great until 2020. Predictably, the potential of AfCFTA was largely undermined by the COVID-19 pandemic. You cannot integrate economies when countries are closing borders, banning travel and so on, in order to contain a pandemic. Therefore, trading under the AfCFTA, which was due to commence on 1st July 2020, was postponed to 1st January 2021. On 1st January, it was new year, new Africa. AfCFTA and Nigeria At first, Nigerian manufacturers feared the AfCFTA. Due to internal inefficiencies, enterprises feared that they would not be able to take advantage of the agreement or compete with an influx of new competitors from other countries. These concerns sparked opposition so Nigeria hesitated with the signing and ratification of the agreement. Nigeria eventually signed on July 7, 2019. Later, on 11th November, we ratified our membership, ahead of the December 5 deadline. Yet, for AfCFTA to achieve its full potential, favorable policies and trade facilitation measures have to be put in place by individual countries. With international agreements, African countries have non-conformity issues. The national policies of many countries often conflict with the goals of regional trade integration. You already know. This is Nigeria’s sub. We were the first to default when it suddenly closed its borders. Nigeria’s border closure In August 2019, Nigeria closed the Nigeria-Benin border. Our government claimed that smuggling was undermining our industrialisation efforts, and it may have been right. It also claimed that the borders were closed to curb the smuggling of hard drugs, arms and agricultural products. Unsure about this part. Regardless, the closure contravened our commitments under the Economic Community of West African States (ECOWAS) and raised concerns about the plausibility of the AfCFTA. Well, within Nigeria, the result of this closure was tragic. Weeks ago, we explained how food prices have soared, reaching an all time high of 18.3%. Also, food inflation in the country reached a three-year high of 14.9%, according to the National Bureau of Statistics (NBS). The Minister of Finance, Zainab Ahmed, confirmed that the closure of Nigeria’s land borders contributed to this rising inflation. According to GDP data released by the National Bureau of Statistics for the third quarter of 2020, Nigeria fell into its second recession in five years. Open sesame! On 16th December, the presidency finally directed the opening of four land broders: Seme, Illela, Maigatari and Mfun. Last Tuesday however, the federal government emphasized the ban on rice importation into Nigeria. In December, Buhari had directed that the CBN “must not give money to import food. Already, about seven states are producing all the rice we need. We must eat what we produce.” Well, this reasoning is somewhat questionable. The issue is that Nigeria is heavily reliant on imports to feed our booming population of 200 million people. Meanwhile, our production capacity remains inadequate to meet food and raw material demands. We still need to import and trade. What happens next? The AfCFTA is here to stay! It can consolidate Nigeria’s economic growth in many ways. Interaction at our borders will reverse the decline of the trade sector, one of the largest employers of labour in the country. Of course, the AfCFTA would improve employment rates of Nigeria’s large working population. In addition, Nigeria is blessed with natural resources for manufacturing and exportation. If our government increases investments in the manufacturing sector, the nation will produce goods locally and trade actively internationally. This way, the sector can significantly increase revenues. What the country must now do is ensure that our exports surpass our imports, so that we encourage the local market instead of suffocating it. How can we do this? Perhaps it is time to improve infrastructure and enforce policies that would reduce local cost of production.
Policy Round Up: The Federal Government and MSMEs
Again, the Youth Empowerment Fund In November, the federal government earmarked a N75 billion youth empowerment fund. The Minister of Youths and Sports Development, Sunday Dare, explained that the fund is billed to cater for youths within the age bracket of 18 and 35. According to him, the fund “is meant to create a special window for accessing credit facilities and financing on the part of our youths that will help to fund their ideas, innovations and also support their enterprise.” He also stated that his Ministry would work with the Ministry of Finance, Budget and National Planning and the Central Bank of Nigeria to facilitate youths’ access to the fund and thereby meet its set objectives. Subsequently, the CBN (Central Bank of Nigeria) revealed the implementation framework for this fund – the “Nigerian Youth Investment Fund” (N-YIF). Beneficiaries and registered businesses are to be determined based on the nature of projects and subject to a maximum of N250,000 and N3 million respectively. The FG’s intervention will be for a maximum of 5 years, depending on the nature of the businesses and the assets acquired. An interest rate of not more than 5% will be charged annually. When we considered this as news, we noted important questions as to the plausibility of the funding, its scope, assessment of beneficiaries, tracking of outcomes and so on. Covid-19 and fall in oil prices have taken their toll on Africa’s most populous nation. With Nigeria slipping into recession and food inflation skyrocketing, social and economic policies have never been this momentous. Before and after the youth empowerment fund, the Nigerian government introduced many other social programmes that target Micro, Small Medium Enterprises (MSMEs). We would now like to inform you about a few recent efforts. That’s the objective today. Welcome. Funding registration On Thursday, 10th December, the Federal Government disclosed that it is funding the registration for 250,000 Micro, Small Medium Enterprises (MSME). These businesses will be registered at zero cost, under the FG’s Economic Sustainability Plan (ESP). The disclosure was made by the Minister of Trade and Investment, Niyi Adebayo via the government’s Twitter handle. The Economic Sustainability Plan was formulated to drive the implementation of various support schemes for small businesses. A 10-man steering committee was inaugurated in August with members from both the public and private sectors. Survival fund In July, the Federal Government announced plans to disburse a N2.3 trillion stimulus package. It was titled the Nigerian Economic Sustainability Plan, and the purpose is to keep MSMEs afloat amid the economic challenges caused by the pandemic. The core of the program is a N75 billion Micro, Small and Medium Enterprises (MSME) Survival Fund and Support Initiative. This initiative includes a N60 billion MSMEs Survival Fund and N15 billion Guaranteed Offtake. The goal of the MSMEs Survival Fund is to support vulnerable micro and small enterprises in meeting their payroll obligations and ultimately safeguarding jobs. Through this Fund, the FG intends to save at least 1.3 million jobs and impact over 35,000 persons per state. Only MSMEs who have between 10 to 50 staff are qualified for the fund. Eligible enterprises will have their staff salary paid directly from the fund for 3 months. Meanwhile, the Guaranteed Offtake Stimulus Scheme is expected to boost the production capacities of small businesses in order to protect them from the economic disruptions of the Covid-19 pandemic. In September, the FG released guidelines to access the schemes. Registration was opened to every sector, one after the other. Subsequently, the Ministry of Industry, Trade and Investment disclosed that a total of 174,574 persons successfully registered for both schemes within 48 hours. In October, 70,000 businesses were shortlisted from the 432,000 Nigerian businesses that applied for the payroll support. Subsequently, on 19th November, the Presidency announced that 101,567 beneficiaries, drawn from 16,253 businesses had received their first monthly payment from the program. The information was disclosed via the official Twitter handle of the President. Special grant to rural women The Grant for Rural Women was introduced as part of the President’s social inclusion and poverty reduction agenda. It is a part of the National Social Investment Programme, with a target of lifting 100 million Nigerians out of poverty in 10 years. Way to go! The grant was introduced by the Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development and it involves a one-off grant to some of the poorest women in rural Nigeria. Through this grant, 700,000 women are to be empowered with N20,000 each. The grants were launched in Plateau state and subsequently disbursed in Ondo state. In November, they went to women in rural areas of Gombe state. The Ministry disclosed this via Twitter. The Minister, Ms. Sadiya Umar Faroq, urged the women to use the grant to improve the lives of their families. No kidding. Conclusion Many other efforts are worthy of mention. In November, the Development Bank of Nigeria disclosed that it had disbursed over N150 billion since 2017, impacting MSMEs. The Twitter account of the Nigerian Government later revealed that 52% of these loans were to youths and women-owned businesses. Well, this is all we have time for today. A lot is desirable about social policies in Nigeria. Again, the important questions – how does the government measure impact? Who are the beneficiaries? How exactly are beneficiaries vetted? Who can verify exactly where funding goes? Until these are answered, the FG may unveil policy after policy, with no tangible evidence of change. Finally, do you know anyone that received any of the above funds? We would like to check something…
Consumer rights in Nigeria
On the back of our journey into Nigeria’s digital economy, we’re heading straight to legalese. Today, we’re all about consumer protection. What are the rights of a Nigerian consumer and how can these be enforced? Welcome back, ladies and gentlemen! Let’s get to it! First, who is a consumer? A Nigerian author defined a consumer as a person who buys products or services for personal use and not for manufacture or resale. What then is consumer protection? Consumer protection is everything we do to prevent consumer exploitation. Through consumer protection, the government ensures that consumers derive maximum satisfaction from the services available in the market. The Nigerian government has passed several laws and set up several agencies to protect the rights of consumers – NAFDAC (National Agency for Food and Drug Administration and Control), SON (Standards Organization of Nigeria), NDLEA (National Drug Law Enforcement Agency) and the FCCPC (Federal Competition and Consumer Protection Council). This article dwells on the FCCPC as a beacon for consumer protection in Nigeria. The Federal Competition and Consumer Protection Act On 5th February 2019, the President assented to the Federal Competition and Consumer Protection Act (FCCPA). In summary, the purpose of the Act is to remove monopolies and market dominance, alongside protecting the rights of Nigerian consumers. In the Act, reference is repeatedly made to the consumer (the person who buys a good or procures a service), the undertaking (the person who supplies the good or service) and the commission. Remember these. So, what rights do you have under the FCCPC? A number of interesting ones really… Rights of a consumer The right to information. A consumer has a right to information in plain language. So, an undertaking that displays goods or services for sale must display the price of these goods/services. The Act further provides that an undertaking cannot require a consumer to pay a price for any goods or services higher than the price on display. No kidding. An undertaking must not mislead consumers as to a trade description. That is, they may not claim that goods have a particular feature when they do not. A supplier even has the responsibility to correct a misunderstanding on the part of a consumer. Importantly, where a consumer agreed to purchase goods because of a description or sample, the goods delivered by the undertaking must correspond to that description or sample. Yes, this means that what I ordered vs. what I got is illegal. In fact, when an undertaking supplies second-hand goods, they must notify consumers that the goods are second-hand. An undertaking is further mandated to provide a receipt to every consumer that is supplied goods/services. The right to cancel and seek refund A consumer has the right to cancel any booking, reservation or order, subject to the payment of a reasonable charge. A consumer has a right to return goods (within a reasonable time after delivery) and receive a full refund in two scenarios – first, when goods are purchased for a particular purpose and it turns out that they are unsuitable. Second, when the consumer did not have an opportunity to examine the goods before delivery and it happens that the delivered goods do not correspond with the description, sample, type and quality that was agreed. The consumer may return goods within three months of delivery. The right to examine A consumer has the right to select or reject from the goods on display before paying. A consumer is not responsible for any damage to goods on display unless the damage is a result of carelessness, malice or crime. Responsibilities of an undertaking An undertaking cannot limit or transfer its risks through a notice to the consumer. That is, an undertaking cannot claim to not be responsible/liable. Yes, all the businesses with a “no refunds” policy may be wrong. Also, an undertaking has a duty to label goods properly so it can be easily traceable. They have a duty to notify the public of risk as well as an obligation to withdraw hazardous goods. Where damage is caused to a consumer by defective goods/services, the undertaking that supplied the goods/services is strictly liable for the damage. A person affected by the defective goods/services has the right to sue. Most importantly, how do you enforce consumer rights? How do you sue? How do you sue? When a consumer seeks to enforce a right under the Act, it/they may refer the matter to the (defaulting) undertaking, to an industry sector regulator or to the Commission (the FCCPC Commission). A consumer may also approach a Court directly. Where a matter is referred to the Commission, it may issue a “notice of non-referral” if the matter is groundless. If the matter has grounds, the Commission may refer the complaint to the industry sector regulator or may direct an inspector to investigate immediately. After receiving the report of the investigator, the Commission may issue a notice of non-referral, make an order or issue a compliance notice. Ultimately, a wronged consumer has a right to begin a civil action for compensation in a court. Anybody who contravenes any consumer rights is liable to imprisonment for five years or N10,000,000 or both. In the case of a company, it is liable to N100,000,000 or 10% of its turnover whichever is higher. Also, each director is personally liable. Well, there you go!
Nigeria’s Emerging Digital Economy (2)
Our new series examines the many facets of Nigeria’s digital economy, the efforts of the Nigerian government to propel it and its relationship with governance and prosperity. Last week, we took on Nigeria’s digital infrastructure and the state of financial inclusion. Today, we’re onto digital inclusion, financial technology and technology in government. Last week, we concluded by noting how mobile phone usage offers the most realistic means of improving financial and digital inclusion… Mobile phones Indeed, mobile phone usage offers the most realistic means of improving financial and digital inclusion. While internet penetration is a little over 40%, Nigeria already has a mobile phone penetration rate of 87%. Meanwhile, the adult literacy rate is 62%. This reinforces the belief that persons only need a basic education to use phones. Do they need to be wealthy either? No. Recycled phones dominate the Nigerian market. Also, mobile phone brands like TECNO, Infinix and Itel that are made specifically for the low budgets of Nigerian users. For Nigeria to reap the dividends of mobile connectivity, 4G-enabled mobile phones must be made even more attainable for the entry-level market. One way policy makers can achieve this is by reducing the tax burdens on mobile phones and services. They must begin to perceive these as a necessity, instead of a luxury. Indeed, the use of mobile phones impacts significantly on the Nigerian economy. Besides affording small businesses the means to participate in e-commerce, it has become the fulcrum for another emerging sector – fintech. Fintech The Nigerian financial system has been quite receptive to the introduction of technology. Mobile banking solutions are driving the banking sector. Alat by Wema Bank and 737 by GTBank are some of the digital banking platforms that offer financial services 100% online. Platforms like Flutterwave and Paystack are enabling online payments for businesses. Piggybank helps Nigerians save, PayLater and QuickCheck allow users access quick loans. Nigeria’s fintech thrives on the back of rapid technological advancement, foreign investment and a young population. Frost and Sullivan expects Nigeria’s fintech revenue to reach US$543.3 million in 2022 from US$153.1 million in 2017. According to Weetracker, Nigerian startups attracted $663.24 million in venture capital last year, by far the largest share in Africa. Interswitch ($200 million) and Opay ($170 million), two payment platforms, accounted for almost half that number. And we all know about Paystack’s recent deal… However, the greatest challenge the fintech sector faces is regulation. Regulators must decide on how to regulate innovation without killing it. Within the past year, federal and state governments have enacted regulations and imposed fees with reckless abandon. It is perhaps wiser to allow innovation to grow without hindrance. This way, there will be plenty to tax later. Governance and Sustainability It is useful to add that digitization is not only enabled by governance, it can also contribute to it. The adoption of digital technologies can improve public service delivery and public accountability. Kenya is Africa’s leader in terms of digitization. Its digital economy contributed 87% to GDP in the third quarter of 2019 (while Nigeria’s contributed 14%). Attention should also be drawn to how digitisation has improved public revenue collection and saved $290 million in efficiency gains over four years. Digitisation will reduce costs of service delivery while also improving their quality and coverage. For instance, quality of service can be improved by creating feedback flows from citizens to public service providers. This feedback can be used to improve government agencies, ministries and other institutions for public service. Digitisation projects are notoriously likely to run over budget, experience delays and eventually fail to deliver results. The foundation must therefore be laid, one that entails ready infrastructure, capacity building within government institutions and digital literacy amongst citizens. Ultimately, political will. To leverage digitization and automation for transparency and accountability, political will is key. It will reap evident rewards. In June 2020, the Head of the Civil Service of the Federation explained how a platform, IPPIS (Integrated Payroll and Personnel Information System) had determined the actual number of serving public servants. By cleaning Human Resource data, it had saved the government at least 60 billion naira. Experts say that if Nigeria digitally transforms and integrates the information and communications systems of its public sector, it can save $5.6 billion annually. Finally, in adopting digitization, the government must also engage and orient stakeholders. The current ASUU (Academic Staff Union of Universities) strike was ignited by the insistence of the federal government to pay university lecturers through IPPIS. Perhaps a little more chill next time?
Nigeria’s Emerging Digital Economy (1)
Do you recall those pictures of Isa Pantami? That showed the Minister of Communications and Digital Economy stunning his audience with fitness exercises? The Ministry captioned them “STAYING FIT TO DELIVER EFFECTIVE SERVICE! The Honourable Minister of Communications and Digital Economy, @DrIsaPantami demonstrating to management Staff of the Ministry some exercise tips during the ongoing 2-day retreat.” Well, this post is about everything else – what the Ministry should be prioritizing in giving Nigeria the Digital Economy lead. Stay here! The global digital economy was worth $11.5 trillion in 2016, 15.5% of global GDP. It is expected to grow to 25% by 2020, faster than the global economy. The Nigerian digital economy is making its own strides, contributing 14% to GDP in the third quarter of 2019. The NIPC (Nigerian Investment Promotion Commission) believes that it would generate $88 billion by 2021. Meanwhile, a report released by Google and the International Finance Corporation (IFC), estimates that Africa’s internet economy has the potential to reach 5.2% of the continent’s gross domestic product (GDP) by 2025, contributing nearly $180 billion to its economy. Our new series will therefore examine the many facets of Nigeria’s digital economy, the efforts of the Nigerian government to propel it and its relationship with governance and prosperity. Today, we’ll take on Nigeria’s digital infrastructure and the state of financial inclusion! What is Nigeria doing? Nigeria’s efforts The Nigerian government has vocally prioritized the digital economy. In November 2019, President Muhammadu Buhari unveiled the National Digital Economy Policy and Strategy (NDEPS), a so-called guide for the digital economy. The Digital Economy drive has apparently begun. At the forefront is the Ministry of Communications and Digital Economy. In August 2020, the Minister, Dr. Isa Pantami, announced that it had completed 11 projects under said drive and was commissioning Phase 2. In December 2019, he had said that a pervasive broadband penetration would make Nigeria a truly digital economy. He said this at the launch of the Nigerian broadband plan for 2020-2025. The ambitious plan aims at increasing broadband penetration to 90% by 2025. Accordingly, internet speed would be a minimum of 10 megabits per second (Mbps) in rural areas and 25Mbps in urban areas. Also, data would be affordable at ₦390 per 1GB. Well, 5 years to go! Assessment The World Bank launched the Nigeria Digital Economy Diagnostic Report in 2019. According to this report, with improved digital connectivity, digital skills and literacy, Nigeria can reap benefits from the digital economy. To achieve this however, Nigeria must build the five pillars of a digital economy, as formulated by the Digital Economy for Africa initiative (DE4A). They are digital infrastructure, digital platforms, digital financial services, digital entrepreneurship and digital skills. These criteria introduce interesting talking points. How well is Nigeria doing? Digital infrastructure Nigeria faces a dearth of infrastructure, without which the digital economy cannot thrive. Connectivity is minimal in rural areas, leaving a significant percentage of the population without internet access. To achieve broadband penetration, for instance, extensive broadband infrastructure is key – deployment of fiber optics and connection to towers, from the shores to the hinterlands. Financial inclusion Nigeria also faces challenges with access to financial services. 41.6% of Nigeria’s 190 million people are financially excluded. Only 29% of adults have bank accounts. In 2012, the Nigerian government, through the Central Bank, launched the National Financial Inclusion Strategy to achieve 80 percent inclusion by 2020. Reports show however that financial exclusion has only reduced by 2.9 percent (from 39.7 percent in 2012 to 36.8 percent in 2019). What is the challenge with financial inclusion? The hurdles range from formal means of identification for millions to proximity of financial institutions. Poverty and illiteracy are also barriers to financial inclusion. 60% of Nigerians live below the poverty line. In 2018, Nigeria overtook India as the country with the largest number of extremely poor people. Northern Nigeria is predictably the worst hit. The result? 20.7 million of its adults are financially excluded. In addition, only the financially literate can maximize the opportunities of a financial system. And a vast majority are illiterate. Low enrollment in basic education and the poor quality of that education cripple both financial inclusion and digital inclusion. A lack of digital skills in the curricula segments digital skills into a slim share of the population. The absence of up-to-date training in STEM (Science, Technology, Engineering and Mathematics) and the inadequacy of equipment in schools ultimately result in the exclusion of the poorest from the benefits of the digital world. Nigeria must therefore close the digital skills knowledge gap. Perhaps, by increasing higher level education and creating online training initiatives to reach people wherever they are. Ultimately, mobile phone usage offers the most realistic means of improving financial and digital inclusion… We must stop here. We will discuss this and more next week. Stay glued!
Insurance in Nigeria: The Industry
The global insurance industry maintained steady growth in 2019 as premiums increased by 3.0% to $6.3 trillion representing 7.2% of Global GDP (Gross Domestic Product). Insurance is a big deal everywhere else. This post examines the Nigerian situation. What makes up the Nigerian insurance industry and how is it doing? Stakeholders According to BusinessDay, 57 registered companies make up the Nigerian insurance industry. 14 of them are life insurers while 43 are non-life insurers. There are also 2 reinsurance companies whose roles are to provide technical security and capacity for the insurance companies. Most insurance companies are incorporated pursuant to the Companies and Allied Matters Act 1990 (An Act that has been replaced with the Companies and Allied Matters Act 2020). Other stakeholders include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance. There are 460 registered insurance brokers and about 15,000 insurance agents. The Nigerian insurance market has been described as a brokers’ market because brokers currently control over 90 per cent of the premium income, with less than 10 per cent for insurance agents and even direct marketing channel by insurers. The National Insurance Commission (NAICOM) is the regulator that exercises supervisory and administrative capacity over the insurance business in Nigeria. How is the insurance industry doing? In the Nigerian insurance sector, growth was faster than the country’s economic growth of 2.3%, as the sector expanded 3.6% in 2019, according to the National Bureau of Statistics. In June 2020, Fitch Solutions predicted that the Nigerian insurance sector would witness considerable growth in the medium to long term, despite an interruption in 2020 due to the COVID-19 pandemic. The life insurance segment is expected to grow its premiums to as much as N207.96 billion by 2024. On the other hand, the non-life insurance segment of the market (which is significantly larger), is projected to grow its premiums by a revised 2.9% to N248.85 billion in 2020. It was however mentioned in the report that these projected growths are not going to come about easily, mainly due to Nigerians’ general lack of enthusiasm for insurance. In our last post, we said a lot about the insurance culture. Didn’t we? According to Fitch Solutions, premiums growth will continue to be limited due to expected low average earnings by the insurance firms. Widespread poverty and general indifference were identified as a major factor making it impossible for a lot of Nigerians to access insurance covers. Could they have foreseen October though? Hoodlums and what not As you know already, peaceful protests staged against the activities of the Special Anti-Robbery Squad (SARS) were hijacked by hoodlums, who then began the destruction of both private and public properties. Remarkably, the Lagos State Governor, Babajide Sanwo-Olu, was reported to have said the state alone would need N1 trillion for reconstruction after the destruction caused by the hoodlums. Importantly, stakeholders expect insurance claims to run into billions of naira. Would this be overwhelming for the insurance players? The sector is yet to recover from the effect of the Covid-19 pandemic which has resulted in an increase in health, travel and business disruption claims. Afterall, it posted a contraction of 29.53% in the second-quarter GDP report published by the National Bureau of Statistics (NBS). Foreign interest According to Oxford Business Group, Nigeria’s insurance sector is attractive chiefly for its potential. The number of uninsured prospective customers is among the world’s largest within a single market. Nairametrics noted that foreign players have been showing serious interest in the Nigerian insurance sector. A typical example is AXA, a French insurance company which has stakes in Nigeria’s AXA Mansard Insurance Plc. Other examples are South Africa’s Old Mutual Ltd and Sanlam Emerging Markets (Proprietary) Ltd. Way Forward Agusto & Co noted that with more than half of the population living below the poverty line, the idea of insurance is unthinkable to a significant number of Nigerians. In addition, consumer purchasing power continues to be negatively impacted by high inflation. Thus, there is a need for insurers to offer specific products that cover just the right amount of insurance that is desired at various income and demographic levels. Afrinvest Research advises that it is pertinent that micro-insurance policies – which are specially designed for the low-income market, micro and small-scale enterprises – are promoted. In this regard, NAICOM recently licensed two full-fledged micro-insurance companies, GOXI and Cassava Micro-insurance companies, to offer life and general micro-insurance services in Lagos state. Finally, insurance operators have under-invested in consumer education, thus creating a vacuum that leaves consumers and operators as losers in the game. Investing in consumer education could help to restore confidence in the Industry and align expectations appropriately.
A look at Nigeria’s Data Protection
A year ago (October 2019), the National Information Technology Development Agency (NITDA) commenced investigation into a potential breach of privacy rights of Nigerians by Truecaller Service. You must know about this. That app that lets people know your name when they call your phone. Apparently, the privacy policy of Truecaller was divided into two sets – one for those in the European Economic Area (EEA) and another for those outside the EEA. Nigeria fell under the second category. An assessment of the relevant policy revealed noncompliance with the NDPR. An expository press release (as published on NITDA’s website) concluded with the following words: NITDA would like to assure Nigerians that we will continue to monitor the activities of digital service providers with a view to ensuring that the rights of Nigerians are not unduly breached while also improving the operational environment to support ethical players in their bid to get maximum benefit from Nigeria. How well has NITDA done since then? How secure is data in Nigeria? Last Friday, thisdaylive.com wrote about the efforts of NITDA to implement the Nigeria Data Protection Regulation (NDPR). According to this article, within the space of one year in office, NITDA has created more than 2,700 jobs. Also, Nigeria’s data security industry has surpassed the N2.5 billion mark. Ultimately, the agency has ensured strict compliance with the NDPR. While we cannot confirm or challenge these commendations, today’s article discusses the NDPR and prior legislation that are part of Nigeria’s data protection efforts. Just so you know your rights? Data Protection Laws in Nigeria In the beginning, there was no comprehensive law for data protection. However, the privacy of persons was protected by Section 37 of the 1999 Constitution which guarantees the privacy of citizens, their homes, correspondences, telephone conversations and telegraphic materials. Soon, there were specific laws that contained snippets of data protection. The National Identity Management Commission Act of 2007 established a commission. This commission is responsible for operating a National Identity Database. The Act provides that no person or company shall have access to data or information contained in the database with respect to a registered individual without authorization. Also, the Freedom of Information Act No. 4 of 2011. This Act actually provides for public access to public records. Still, it prevents a public institution from disclosing personal information to the public unless the concerned individual consents to such disclosure. It also provides that a public institution may refuse to disclose information that enjoys professional privilege (lawyer-client privilege, for instance). The Consumer Code of Practice Regulations was issued by the Nigerian Communications Commission (NCC) in 2007. It requires telecommunication operators to take reasonable steps to protect consumer information against “improper or accidental disclosure”. The National Health Act of 2014 requires health establishments to maintain health records for every user of health services. The confidentiality of such records is to be maintained and protected. Meanwhile, the Cybercrimes Act 2011 prevents the interception of electronic communications and imposes data retention requirements on financial institutions. Finally, the Federal Competition and Consumer Protection Act of 2019 requires the Commission to protect the business secrets of all parties involved in the Commission’s investigations. The Nigerian Data Protection Regulation In 2007, the National Information Technology Development Agency was set up by the National Information Technology Agency Act as the statutory agency with the responsibility for planning, developing and promoting use of information technology in Nigeria. The Agency is mandated to develop regulations for electronic governance and to monitor the use of electronic data. In line with this responsibility, the Agency issued the Nigerian Data Protection Regulation (NDPR) in January 2019. Essentially, the Regulation aims at protecting the personal data of all Nigerians and non-Nigerian residents. It targets transactions that involve the processing of personal data. The Regulation is directed to government agencies and private organizations that own, use and deploy Nigerian information systems as well as foreign organizations that process personal data of Nigerian residents. Data is personal when the information relates to an identified or identifiable natural person, whether it relates to his or her private, professional or public life. Personal data must be processed for the specific lawful purpose as consented to by the Data Subject. It must be without prejudice to the dignity of the human person. Also, it must be stored only for the period within which it is reasonably needed. Finally, it must be secured against all foreseeable hazards and breaches. A Data Subject is identified as the individual who the data is about. A Data Controller is the company or organization that possesses/requests for your data. The advent of information technology has quadrupled the amount of information available. Necessarily, governments of the world are promulgating data protection legislation to regulate the processing of data and to safeguard information of persons. The Nigerian experience has been slow and steady.
Investment Opportunities for these Corona Times
Nigeria’s index case of Covid-19 arrived in Italian packaging on February 28, 2020. On 24th March, Lagos State declared a lockdown after 30 cases in the city and 46 cases nationwide. A national lockdown followed on 30th March. And so the story continues… 2020 needs to calm down. The lockdown has been eased in many parts of the country, but it is uncertain when economic activities will resume. According to the International Monetary Fund (IMF), the global economy will shrink by 3% this year. It described this decline as the worst since the Great Depression. Oops.Relax, though. We come with good news. This post centres on two investment opportunities you can exploit during this period. The following options are not entirely immune to present economic challenges, but they are doing better than others. Stay with us! Real Estate What’s up? The Nigerian Economic Report shows that Nigeria’s real estate sector is the third largest contributor to its GDP. Yet, the World Bank estimates that the country has a 17 million housing deficit. Coupled with the steady growth in the country’s population, these reveal investment potential. Investing in real estate, especially in commercial parts of the country, attracts high returns. According to Reuters, a successful investment can earn returns as high as 30-35 percent! There are many options available to the real estate investor. You may consider property development. You may consider renting, as statistics reveal that 87% of Nigerians live in rented apartments. You may just own land. After all, owning land is a hands-off investment. Oh, you may also consider land flipping – buying in areas that are developing and selling for profit months/years later. What’s fun? REITs. Real Estate Investment Trusts allow you to make real estate investments without actually acquiring a property. It is a collective investment scheme – different investors pool funds to buy property. The portfolio is managed by a professional. REITs are regulated by the Securities and Exchange Commission and traded on the Nigerian Stock Exchange, just like shares. What’s new? Taxes. In July, there was outcry when the Federal Inland Revenue Service (FIRS) imposed a 6% stamp duty on all tenancy and lease agreements. The Chairman (of the FIRS) later clarified that this rate only applies to agreements that exceed 21 years. Where the tenancy is yearly or less than seven years, the rate would be 0.78%. In tenancy from seven years to 21 years, the applicable rate would be 3%. Agriculture What’s up? Nigeria is largely an agrarian economy. According to the National Investment Promotion Commission (NIPC), the agricultural sector contributes 25% to the national GDP and accounts for 40% of the labor force. The sector’s growth has averaged 4% over the last 5 years. Therefore, agriculture has proven to be a profitable investment. Reliable too. No matter what, Nigerians will eat. Last year, 57% of the Nigerians’ total spending was on food! What’s new? The national accounts show that the agriculture sector grew by 2.2% in the first quarter of the year. However, restrictions on movement have predictably slowed farming – impeding farmers’ access to markets and the distribution of products. The threat this poses is rise in costs (and food price inflation). However, agriculture benefits from numerous interventions by the federal government. The CBN consistently improves farmers’ access to credit. In August, the Federal Government launched an intervention scheme called the Agric for Food and Job Plan. It is designed to create about 5 million jobs in the sector and add about 10 million metric tonnes of food. Loans are given to farmers at 0% interest rates. What’s fun? Agriculture requires continuous involvement. If you are not interested in direct farming however, you can consider crowdfarming. Digital crowdfarming allows several persons to invest in smallholder farms for a particular farm cycle. The investors share in profits (usually an ROI of between 15 – 30%). The process happens online so no physical interaction is required. However, you are advised to confirm the legitimacy of the platform you choose, as well as its insurance cover! Well, that is all we have time for in this episode. Look at us. Out here caring about you and your money. We hope this article was informative and useful. Stay with us for more content!
Investment Opportunities for these Corona Times 2
Hello there! We hope you and yours are safe and sane. Welcome to the second episode of our post on investment opportunities to exploit during the pandemic. Local and global markets are gradually working their way back to optimal performance. In Nigeria, a new Companies and Allied Matters Act has been passed and FGN Savings Bonds are back on offer. Perhaps, we should have considered government bonds in this post. Cryptocurrency too… Blockchain.com reports that the highest flow activity in its wallet app since April 2020 has been from Nigeria. Hmmn. Haha, the point is economic activities are doing better. Again, the options we are discussing are not entirely immune to present economic challenges, they are only doing better than others. Last week, we considered real estate and agriculture. Well, this week we will discuss… drum roll Logistics What’s up? Logistics is why those memes about Jeff Bezos exist. It is one of the fastest-growing sectors in the world. Because Nigeria is spread over 350 thousand square miles, logistics is a lucrative business investment option. Infrastructure development, coupled with a growth in the e-commerce sector are fueling this sector. In Nigeria however, it faces obvious problems. Bad roads and traffic jams increase costs. The industry therefore holds potential for disruption. Bike logistics, for instance, is effective in avoiding traffic congestion and ensuring same day delivery. What’s fun? During lockdown, logistics have become indispensable, since food, medicine and belongings have to be delivered, as people are less eager to move themselves. What’s new? Regulations. In July, the Nigerian Postal Service (NIPOST) announced new regulations to govern the logistics and courier sector of the economy. It categorised logistics companies into international, regional, state, municipal or intra-city, and SME operators. Accordingly, international operators were to pay ₦20 million as a license fee, national, ₦10 million and regional operators, ₦5 million. State, municipal and special SME operators were to pay ₦2 million, ₦1 million and ₦250,000 respectively. Each operator was to pay 40% of the license fee as renewal fee annually. Nigerians immediately protested this development via #SayNoToNipostFee on Twitter and similar campaigns. NIPOST has since halted the regulation. But stay woke. E-commerce What’s up? 70% of the world is connected on mobile and Africa is catching up. PwC reports that between 2007 – 2016, mobile phone usage in Africa increased by 344%. There are at least 25 million smartphone users in Nigeria. According to Statista, Internet penetration amounted to 46.6 percent of the population in 2020 and is set to reach 65.2 percent in 2025. What mobile phones do is afford people the means to participate in e-commerce. Nigeria’s e-commerce sector is Africa’s largest, valued at $13 billion. You may transition from brick and mortar to create your own ecommerce website or you may ride on the back of successful giants like Jumia and Konga. What’s fun? Power supply and broadband internet remain challenges for the e-commerce sector. Also, cough internet fraud cough. However, e-commerce is the exact kind of business that capitalises on a pandemic. Everyone is indoors and online. Families need to stock perishable goods. More persons are working from home and will require essentials like edibles, toiletries and appliances. Gadgets too. Also, the pandemic is clearly not slowing people’s use of their phones and the Internet. It is increasing it. Data from the National Communications Commission reveals rugged growth in the telecoms sector. What’s new? E-commerce involves searching, ordering, payment and delivery. So yeah, e-commerce requires logistics to function. So, insert the concern about NIPOST regulations here. The many consumers who have become dependent on online shopping may lose interest if these charges are enforced. This is because the prices of goods sold online may increase. On July 25, the Federal Minister for ICT tweeted at @NipostNgn saying that the increase in licence fees was not part of the regulations he approved. Perhaps a question is, which part of the regulation was approved? Oh well, we are at the end of this ride. We hope that all of this was useful, to assist in your independent decisions. Remember, we are a private equity company and do not solicit for or take investments from the general public. So do consult your professional investment advisor. You may however join our mailing list for information on how we help businesses and private individuals. Bye for now!
What is Private Equity?
Volition Capital Investments Limited is a private equity company that helps the honest and hardworking create wealth. You must know this part of the gist already. But are we assuming you know what it means? No, we are not. And that is okay. You may not really know what we’re about. So this is why this post is important. Today, we’ll answer simple but important questions. Questions with expository answers too. And in the end, you’ll know about private equity and what we do. So keep reading! What is Private Equity (PE)? Literally, private equity is a stake in a company that does not have publicly traded shares. Before a private equity firm invests in a company, they raise capital from investors called limited partners. This capital is used to form a private equity fund. Once they hit their fundraising goal, they close this fund. The investments these partners make come with a maturity period called an investment horizon that typically ranges from four to seven years. The stake is eventually sold to another company or investor at a profit. This sale is called an exit. Finally, it distributes the profit from the sale to its limited partners. Then it does this all over again. And that, friend, is the summary. But there are more questions! What are the types of Private Equity? Leveraged buyouts and venture capital are the most popular types of private equity funding. • Leveraged buyouts: This is the most popular form of private equity funding. It involves buying out an entire company with the objective of improving its business and reselling it for a profit. A private equity firm identifies a target company and then creates something called a special purpose vehicle (SPV) to fund the buyout of said company. • Venture capital This one is the most innovative though. Here, investors (also called angels) provide capital to entrepreneurs. Venture capital is called different things depending on the stage it is provided. If it is provided to scale an idea from a prototype to an actual product, it is called seed financing. Early stage financing enables a company to grow further while Series A financing helps it become competitive. There are important differences between private equity and venture capital though. Venture capital is usually invested in unproven but promising companies. Meanwhile, private equity is invested in established businesses. Why Private Equity? PE firms can be flexible. Management is able to experiment with strategies that can turn a company around without the glare of public markets. How do Private Equity firms make money?PE firms charge management fees and performance fees. Management fees are usually charged at 2 percent for managing the assets in a fund while performance fees are usually 20 percent of the eventual profits gained from the sale of a company. Capiche? How is Private Equity doing in Nigeria? Quite well. Between January to February 2019, the Nigerian private equity space recorded investments worth N277.65 billion ($767 million) in deals. This was of course dominated by Coca-Cola’s acquisition of Chi Limited, a deal worth about $500 million. Also, the merger between Access Bank and Diamond Bank which was worth $200 million. Private equity has been useful for fundraising, investments and equity acquisitions. Venture capital has propelled Nigerian startups these past years, reaching $600 million in 2019. In Nigeria, private equity funds are funded by institutional investors like pension funds, sovereign wealth funds, insurance companies, financial institutions and HNIs (High Net-worth Individuals). Enter, Volition Capital!Now that you understand the basics, let’s bring it back to us. How do we do what we do? Through cooperatives, venture funds, debt finance, deal flows and investment education. What exactly do we do? We manage cooperatives, assess viable investments, help institutions raise funds and connect investors to opportunities. And oh, we offer courses and investment plans. All because we what? Because we care! But remember, we do not take investments from the general public. We invite you to join our mailing list though. We have even more information that tells how we help businesses! And that’s all for now. Stay glued until next week!